Good afternoon, and welcome to another episode of Through the Wealth Lens.
I'm your host, Hannes Grascher, private wealth advisor at UBS International.
Joined by my fellow advisor, Max Grascher.
The recent developments in the world of NIL
are something we've discussed in depth recently on the show,
which makes it even more valuable to be able to welcome
on today's guest.
We're pleased to introduce Teresa Hudson,
partner and labor attorney at Munck Wilson Mandala LLP,
to discuss how recent updates in the world of NIL can affect the legal side of now
for both the schools and collectives and student athletes.
As a mother of a former Oklahoma University football player,
she brings a unique perspective to the subject.
Thank you for being with us today, Teresa
Thank you for having me on.
I'm truly grateful to be here.
Teresa.
First off, can you speak a little bit about your experience
as a mother of a student athlete at a major D1 football program
and how you and your firm started the initial practice
that has now grown into what it is?
Well, I'll break that up into two answers.
First, the relationships with a high performing athlete
and their parents or their guardians is one of trust.
And you know, that trust kind of goes both ways.
So you don't want to be so overbearing
that the child wants to rebel,
But also don't be so loosey goosey that they do whatever they want.
You got to provide safe space in place to express their feelings
and thoughts, ideas and dreams about the future.
So what was different about him playing in a Division
one football program versus playing in high school?
First he started with there was no plan B when he was in middle school.
He said that, playing football was his plan
and he was going to be a pilot.
And so, you know, we kind of scoffed at the idea and asked,
what happens if playing in the NFL doesn't work out and says, I've got a plan.
Fast forward to his freshman year in high school.
Didn't make the varsity team after he had expressed to us
that's what he was going to do as a freshman.
Five games into the season, he was moved up to varsity
and he became the superstar at high school, starting running back
for his sophomore, junior and senior year and set quite a few records at school.
Went on to go to college.
Now this is my 4.9 GPA,
holds our 4.7 GPA holding athlete.
That was a superstar in high school
and was called to walk on to the University of Oklahoma
without a scholarship, athletic scholarship that is.
Unbeknownst to the school
He had already applied and been accepted into their aviation program
and had received a full academic scholarship to the University of Oklahoma.
He walked on, and he cherished that time playing football,
and had an opportunity to be amongst some of the greatest football players
in the country and are now some of the players in the current NFL.
And so whether he wanted to play football or not continued in NFL,
he wanted to fly.
So we fostered that decision for him.
Graduated from college and two weeks later started
with Southwest Airlines Destination 2-5.
And I'm proud to say he is currently a pilot
in the destination 2-5 program as a flight instructor here.
Locally.
As parents,
you know, this success story may be different for you, but ultimately
what you have to do is let your athlete write his or her own story.
You can be the ghostwriter in the background, nudging and supporting,
but remember, it's their choice, their life, their decision.
And sometimes that success has to include failure.
Now I want to switch over to how our firm started
the NIL practice group, and how it's grown into what it is.
Not quite three years ago, maybe a little longer than that.
Senior associates Josie Leinart and Tasha Schwikert
Moser brainstormed after the passage of NCAA's
interim initial policy, and multiple state laws
took effect in July of 2021, which allowed student athletes
to officially promote, monetize and benefit from their NIL.
And they worked with our firm's global managing partner, Bill Munck,
and formed this new practice group called We Are NIL.
I joined him, in late fall
of 2022, and shortly
after that we formally launched the we are initial practice group.
Shameless plug can be found at
www.weareNIL.com
Now,
Josie, who is a former actress and a formidable influencer and wife
to formal NFL player and college football broadcaster Matt Leinart,
has insider knowledge and extensive experience
with NIL public appearances and is a phenomenal voice.
Tasha she's an Olympic bronze gymnast
and she's a testament to hard work and dedication.
Her career began as a college athlete at UCLA
and subsequent to performing to becoming rather a lawyer.
She advocated for her clients through NIL education,
through compliance, marketing, and branding.
Tasha is now the Associate Athletic director
for NIL at Rice University here in Houston,
and the firm expanded its
NIL practice group to include lawyers from the firm's corporate practice group
department, the intellectual property team and the Labor and Employment group.
So we all work together providing various services regarding NIL,
including training, contract drafting, contract review,
trademark branding basics, policy drafting and review.
Among other things.
And I know that's probably way more information that you were looking for.
I love the background there, Teresa, and how you've used
your personal experience to relate to the work you do so often.
To dive into some of the specifics of current NIL laws.
What are the biggest compliance pitfalls schools and athletes currently face?
Well, that's an easy answer and in no specific order.
You've got state law conflicts, this uneven playing field between schools
that have a lot of money, schools
that don't, that are competing for the same athletes across the country.
You've got financial mismanagement by the athletes
that don't have proper guidance, for how to manage their money.
And then you've got compliance and legal risks.
So those are the things that, you know, real world examples can't fully explain
thoroughly what those biggest pitfalls that schools and athletes can face
currently and, to shift to the student
athletes, you know, they're really the center of this, right?
What protections do they currently have when signing with brands or collectives.
And, you know,
are there red flags that they should particularly watch out for in contracts?
And, you know, as an attorney, how can attorneys, agents and universities
work together, to ensure that the athletes
are educated and protected with the NIL deals they sign?
Right?
Well, first, there's representation and contractual issues.
So many athletes go into these contracts without legal counsel or experience
representation, which leads to those unfavorable contract
terms or, you know, God forbid,
exploitation by agents and or brands.
Those long term contracts can conflict with future opportunities.
But the biggest thing, the first thing that I would say to those that are,
you know, looking at contracting their NIL rights is to get all of these deals
in writing the contract, the agreement and emails
and make sure that they are included in there's specific, clear terms
about compensation, the deliverables, the duration termination clauses, and,
you know, making sure that the contract doesn't have any pay for play
type language or recruiting inducements, talking to their school's
compliance office before signing anything, making sure that they're in hearing
not just to the NCAA requirements, but also to the state level requirements
and then to their individual schools requirements regarding NIL deals.
And those things have to align with the school, the conference,
the NCAA policies.
In in looking at making sure that you don't have conflicts
with your current deals,
if you will have an initial deal with one brand or one product
that you're not signing or attempting to sign a deal with their competition
so that you're in competition with your current NIL deal.
So, you know, work with certified agents or advisors
who understand NIL regulations, such as we are in Iowa.
Avoid signing exclusive agreements without a legal review.
Always have that available to you, and then be cautious
of those unsolicited offers and high pressure tactics.
Those always seem to come and catch athletes off guard.
we certainly have seen lawsuits, you know, by athletes who were promised
things that didn't, didn't pan out or weren't, weren't delivered.
So I think yeah, I think, as we always say, having a team
behind these athletes to help them with all these issues is so crucial.
I want to switch topics a little bit.
And we've so far discussed, concerns about homegrown student athletes.
But there are also a fair amount of international student athletes
that attend schools in the States, especially in, in basketball.
Right.
Are there any emerging in NIL opportunities for international athletes
and what legal hurdles do they face when monetizing abroad?
Yeah. Wow.
How is international NIL different?
Well it is.
So they face additional hurdles because U.S.
immigration laws, which place strict limits on how
and where they can work, are very crucial.
These restrictions kind of affect that kind of they do
affect their ability to take advantage of NIL opportunities.
Unlike domestic athletes who don't have these visa restrictions.
So international athletes have to consider any NIL deals to ensure compliance
with not only what we talked about before the school,
the NCAA and state level requirements, but also immigration law.
So there's got to be this collaboration with the athlete,
their school, their compliance department and legal advisors
about how they can participate because earning NIL income
can sometimes be considered unauthorized employment in the United States
under immigration law, and could lead to that international athlete
either being deported or their visa being revoked.
Many college athletes hold international college athletes rather
hold F1 or J1 visas that impose strict restrictions on employment.
The F1 visa is the most common that student athletes have,
and that limits them to only having on campus
employment or authorized practical training.
The J1 visa has strict work limitations
and usually only authorized through very specific programs.
So international athletes have to work with their compliance team
and their legal team and strategize
for leveraging NIL without jeopardizing visa status.
They can pursue non-monetary NIL opportunities, such as building
a brand presence while seeking internships or paid
positions through authorized channels like OPT or CPT,
and considering NIL deals based in their home
countries, which then avoids USDA restrictions.
So bottom line, international student athletes that are looking for
NIL deals cannot work
or deliver the product required under that initial deal
while they are in the United States or any U.S.
territories.
They can only deliver under that NIL deal once they are in their home country
or outside of the U.S or outside of U.S territories.
So there's, you know, strategy development planning
that must be critically considered for that international athlete.
That's great information, Teresa.
And so I want to look ahead to the future a little bit.
Are there any major legal battles or precedent setting cases
that could reshape, the NIL landscape in the, you know, upcoming few years?
Well,
currently, the house settlement was decided, back this summer
and within 12, within nine days, there was an appeal filed
by female athletes in regards to the media rights distribution.
And that appeal is still going on.
It hasn't been settled yet.
So that's one case that is still ongoing,
that we will see the results of maybe next year and the year after that,
but there will be others that come forward.
For example, there are two federal, pieces of legislation.
One is the Score act and one is the Safe act.
And I'll share more about that on our We are initial social media podcast.
But be on the lookout for either one of those federal bills to come
and federalize NIL rules,
regulations, compliance responsibilities, etc.
and they're very, you know, different,
pieces of legislation that are out there now.
And, you know, before they go into existence, we will continue to see
nil being challenged in the court system until there has been some definitive,
perhaps even some consistent, rules.
And guidelines across the country regarding NIL, because right now
it's very it's state specific.
Each state has different NIL rules.
Some of them allow, high school students
to participate in NIL and some do not.
So you got to pay close attention
to what those regulations are based upon, where your university
or your college is located, and where are you going to school.
In regards to NIL, just be on the lookout
for those types of rules and regulations that are going to consistently change.
So, so far we've talked about the student athletes.
We've talked about the schools.
I want to move on to collectives and third parties involved in NIL.
So what's one point you'd stress to ensure athletes and their families
that legal representation and agents
to avoid exploitation and NIL deals?
You know, I just can't reiterate what we said before
is ensure that all of these deals, all of this communication is in writing,
get the contract in front of you,
get those agreements in writing any emails.
So any communication that you have with prospective legal counsel
or even with agents, get that communication in writing.
Make sure that you are holding them accountable
and have someone that you trust.
Review that information for you.
Now. Finding a good attorney to assist you with that review
is tantamount to finding a good, partner in your endeavors.
Regarding NIL, making sure that those, contracts
include terms about compensation, their deliverables,
what it is you're going to do to receive that initial money,
how long the duration and those termination clauses, again,
making sure that there is no pay for play inducement language there
and then talking
with your compliance department because they are also best equipped
to help you as a student athlete and as a parent of a student athlete.
Navigate this ever changing world of NIL because they are on the on the forefront
of finding out regulations and rules as they currently change.
I just think you have to be very careful
in reviewing who you are going to get represent you,
because at the end of the day, it is your name, your image, your likeness
that is being, paid for and what you are being paid to support.
So make sure that there is someone you trust in doing those reviews for you.
Can we go a little bit deeper into the role?
Third party collectors play?
Can you explain how it works legally and how schools can ensure
they're not crossing the line into pay for play?
Well, currently under the House settlement, the Commission
has established that any NIL deals over $600 must be vetted and approved
to show that your market value warrants that money at that particular level.
Third party collectives don't
have to adhere to that regulation.
Okay?
So pay for play occurs when that NIL deal is tied to on field performance.
Like so many touchdowns, you get this money,
your team wins, you get this amount of money.
And it's contingent upon attending a specific school
or transferring to a specific school.
So it acts as a salary or a stipend to be on that team
rather than for legitimate promotional work.
And as of July of this year, U.S executive order explicitly
bans third party pay for play placements in college athletics,
and those violations can lead to loss of eligibility,
sanctions for the school, federal investigations, or fines.
Right.
So, you know, looking at
the actual contract and what it is asking the athlete to do
is the best way to look out for crossing that line into pay for play.
And the NCAA
continues to promote NIL deals
that resemble, prohibit, sorry,
prohibit NIL deals
that resemble employment or recruiting inducements.
And the schools are responsible for ensuring that those NIL deals
are independent from athletic performance or enrollment decisions.
Well, there you have it, folks.
Teresa Hudson giving us some really crucial legal
information to consider when looking into the NIL world.
Teresa, we want to thank you for coming on today
and sharing your expertise on the subject with our audience.
We appreciate everyone tuning in.
As usual.
Until next time, soak up the information.
We look forward to seeing you on our next episode of Through the Wealth Lens.
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